Starbucks’ China growth story

Starbucks (SBUX) has come a long way since it established its first store in China (FXI) in January 1999. Today, the company operates nearly 2500 stores in 118 cities across the country and plans to expand it to 5000 stores by 2021. So how did Starbucks’ succeed in a difficult country like China where people traditionally prefer drinking tea to coffee?

Localization

China is a tea-drinking nation and Starbucks’ entry into the market was not easy. Starbucks bridged the gap between the tea drinking culture and the coffee drinking culture by introducing beverages China that was based on local tea-based ingredients. Starbucks also introduced a highly localized menu of beverages and snacks that are particularly customized to suit Chinese taste buds. The company conducts extensive studies to understand the consumer profile to create unique beverages that are “western” but still matches Chinese culture.

Partnering with local players

China is a complex and homogenous market. Within the country, culture and demographics differ between regions. To counter this issue, Starbucks teamed up with regional players to gain access to the Chinese consumer. In north China, it partnered with Beijing Mei Da, a regional coffee company while in the east it teamed up with Uni-President, a Taiwan-based company. To make its presence felt in South China, Starbucks worked with Maxim’s caterers, a Hong-Kong based company. These partners provided Starbucks insights into the tastes and preferences of Chinese consumers as well as helped build on local expertise.

Positioning and demand creation

Starbucks has literally created demand for coffee in China. Traditionally, a tea drinking nation, Starbucks revolutionized how the young Chinese consumer views coffee by adopting a unique branding and positioning strategy. The company created the “Starbucks experience” that appealed to consumers. Today, Starbucks has established itself as an aspirational brand and is able to charge premium prices. Rather than advertising, it projected its brand image by selecting high-visibility and high traffic locations.

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This is post 3 of 6 in the series “Reasons Why China is Crucial to Starbucks' Prosperity”